Bitcoin News Update: Krugman Links Bitcoin's Decline to Waning 'Trump Trade' Hype

Bitcoin’s Price Volatility and the Influence of Politics and Institutions

Recent fluctuations in Bitcoin’s value have highlighted how closely the cryptocurrency is linked to political events and institutional actions. Analysts are examining how shifts in U.S. President Donald Trump’s approval ratings are affecting market attitudes. Nobel Prize-winning economist Paul Krugman has suggested that Bitcoin’s 30% drop since its October high is connected to the diminishing impact of the so-called “Trump trade,” where the cryptocurrency’s fortunes have become increasingly associated with Trump’s pro-crypto stance and vocal support. In a Substack article, Krugman argued, “Bitcoin isn’t money or a hedge—it’s a wager on Trumpism,” pointing out that its price swings resemble those of speculative technology stocks rather than a reliable store of value.

This perspective has gained traction as Bitcoin dipped to a seven-month low of $81,000 before recovering to $90,348, fueling discussions about whether the market is entering a bearish phase.

Institutional Investors Adjust Strategies

Major financial players are reassessing their positions amid the ongoing market turbulence. Investors in BlackRock’s iShares Bitcoin Trust ETF (IBIT) saw their cumulative profits return to $3.2 billion after Bitcoin climbed back above $90,000, indicating a possible shift in market sentiment. The ETF, which controls over 3% of all Bitcoin in circulation, has become a significant force in driving market trends, with renewed inflows following a period of withdrawals.

Geoff Kendrick of Standard Chartered has identified ETFs as a key driver behind Bitcoin’s projected rally in 2025, though the recent instability has put their durability to the test. Meanwhile, SpaceX’s unexpected transfer of 1,163 BTC (valued at $105 million) to new wallets has sparked speculation about the company’s custodial approach and potential liquidation risks.

Corporate Moves and Regulatory Challenges

Companies in the crypto sector are also adapting their strategies. Naver’s $10 billion purchase of the South Korean exchange Dunamu is intended to build AI-powered financial infrastructure, positioning the company to benefit from global digital trends, even as the industry faced a $19 billion selloff in October. Similarly, Strive Asset Management’s planned merger signals a push to incorporate Bitcoin into corporate treasuries, while Riot Platforms is expanding its operations beyond mining to broaden its blockchain activities. These developments reflect a wider movement toward greater institutional involvement in the crypto space, despite ongoing legal hurdles, such as lawsuits against Binance following the October 7 Hamas attack, which underscore the sector’s regulatory complexities.

Market Outlook and Ongoing Skepticism

Despite recent volatility, many in the market remain cautiously hopeful. Users of the prediction platform Myriad estimate a 70% chance that Bitcoin will reach $100,000 again, and expectations of interest rate cuts have helped support prices. However, Krugman’s criticism persists, questioning Bitcoin’s practical value and highlighting doubts about its real-world utility. As the market navigates political shifts and institutional experimentation, Bitcoin’s future may depend on its ability to move beyond speculation and secure a meaningful place in the global financial system.